Paycheck Protection Program (PPP) is a program that was established under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The PPP was intended to provide relief to small and medium-sized businesses that were being affected by the economic impacts of the COVID-19 crisis. The program was given a $350 billion federal fund to provide financial assistance. However, the PPP ran out of funds in minutes, leaving many eligible businesses to miss out on the relief funds. Consequently, concerns about fraud have arisen, and the U.S Treasury Department’s Office in charge is seeking input from lenders on how to improve the program and identify fraud.

PPP Fraud Concerns and Allegations

PPP loan fraud can result from intentional misrepresentations or inadvertent mistakes that led to the inappropriate receipt of federal funds as with any other federal programs. The following are among the possible allegations that may lead to PPP fraud.

Loan Stacking

Loan stacking is one of the types of potential fraud mentioned by the Office of the Comptroller of the Currency (OCC), where an applicant receives funds from multiple lenders. Any company that received funds from more than one lender may become a target in the government’s efforts to prosecute PPP fraud because the federal government can track the distribution of all funds allocated from the program.

PPP Loan Application Fraud

PPP included several eligibility criteria, and companies misrepresenting information on their loan application to fraudulently claim eligibility may face prosecution. Applicants who lied about their company’s number of employees, misclassified employees as independent contractors, misrepresented the company’s payroll costs, among other eligibility requirements, could result in fraud charges.

Fraudulent Loan Certification

PPP loan applicants were required to certify to a variety of facts, and these certifications should have been completed in good faith. Improper certification can lead to fraud allegations, and the mandatory certification includes certifying that the loan is necessary to support ongoing operations, being used to retain workers, making mortgage payments, lease and utility payments or that the company has not and will not receive other loans under PPP. Certifying that all the information provided in the application and all supporting documents, forms included are true and accurate.

Using PPP Funds for Ineligible Purposes

Companies that received funds through PPP are constrained to use the funds for covering four specific purposes such as payroll costs, paying interest on mortgage obligations, rent payments, and utility payments. Funds can only be used to cover expenses under obligations that were preexisting in the case of mortgage interest, rent, and utilities. Using funds for any other purpose is impermissible and can result in fraud allegations.

Fraudulent Loan Forgiveness Certification

Although the program has a low-interest rate, many companies qualify for loan forgiveness, and they must provide documentation that illustrates how they’ve used the funds. If they falsely claim loan forgiveness or wrongly used funds, they risk prosecution.

Misrepresenting or Concealing Information During PPP Audit or Investigation

Many companies will have to go through PPP audits or investigations to confirm if they lawfully received PPP funds. In these cases, the company’s representatives should not withhold any information required to be disclosed to federal authorities as it may be perceived as a form of fraud.

What to do if your company is targeted for PPP Loan Fraud

PPP Loan Fraud is a form of fraud, and anyone who finds themselves in this situation should seek immediate legal representation from experienced federal defense counsel. Legal advice is essential to protect your rights and protect you from potential problems. The legal professionals at Spodek Law Group have experience in dealing with similar cases related to the effects of COVID-19 pandemic and are available to assist companies facing allegations of PPP loan fraud.

Conclusion

Several allegations may lead to PPC loan fraud, which includes loan stacking, PPP Loan Application Fraud, fraudulent loan certification, using PPP funds for ineligible businesses purposes, fraudulent loan forgiveness certification, and misrepresenting or concealing information during PPP audits or investigations. If your company is identified as a suspect of PPP loan fraud, it’s best to reach out to a legal professional immediately to protect your rights and mitigate potential risks.